Page 3 of your Loan Estimate includes measures to help you compare loans.
“In X Years” shows the total amount you will have paid in that time, and the dollar amount applied to your loan principal. The ratio between total paid and principal reduced may change over time.
The APR shows interest PLUS fees as an annual ratio - APR is the actual percentage this loan costs per year.
The TIP figure relates the interest you will pay over the life of the loan to the loan amount. For example - a TIP value of 25% on a $100,000 loan means you will pay $125,000 - $100K principal plus $25K interest - over the life of the loan.
Page 2 of the Loan Estimate provides the current ESTIMATED cash to close. Some costs will stay the same between estimate and closing. Some will change.
These estimates of closing costs plus loan details, Down Payment, Deposits Credits and Adjustments are used to calculate your estimated cash requirements when the loan finally closes. Consider the possible changes and tolerances when evaluating a loan decision.
Real estate transactions require taxes, certain pre-payments, and escrow funding.
Recording fees are charged by government agencies for keeping legal ownership records, while “transfer taxes” may be imposed by states, counties and municipalities on real estate ownership transfers.
Prepayments may include homeowner’s insurance premiums on the property mortgage insurance, if required property taxes for a period of months in advance, and prepaid interest, typically for the period from closing to the first mortgage payment.
Escrow funding may also be required against future annual charges for homeowners insurance, mortgage insurance and property taxes.
Title insurance on YOUR legal ownership - “Owner’s Title Policy” - may be designated as optional, which only indicates that it is not required by this creditor.
Some of these “Other Costs” may vary substantially between Loan Estimate and Closing Disclosure ask your lender about the tolerance rules or watch the video “Could My Loan Cost Exceed The Loan Estimate?”
These costs are paid to outside parties and YOU are free to shop and compare providers for a variety of services. These might include pest inspection, or a survey to verify property lines or a range of Title-related services.
Title services might include:
If you select service providers from the list provided by the lender, their fees cannot change by more than 10% between the Loan Estimate and the final Loan Disclosure. If you select other providers the lender is not responsible for changes in those costs.
These costs are paid to outside parties, not the lender, but you don’t get to choose them. They may include:
While you can’t shop for these services, the price for these services in your final loan disclosure MUST match the price on the Loan Estimate; items in “Cannot Shop” have 0 tolerance for change.
Closing costs are fees paid when the title of the property is transferred to the buyer making them the legal owner.
Origination Charges are fees collected by the lender for the loan process. They may including fees for handling the loan application and “Origination Fees”, which are compensation paid by the creditor to the entity that originated your loan.
“Points” are fees paid to lower interest rates; points are considered prepaid interest for the buyer, and are usually tax deductible.
Finally, Underwriting is a payment to the lender for their assessing the risk that the loan might not be repaid, based on the loan specifics and your financial characteristics.
The first page of your Loan Disclosure shows the Loan Terms Projected Payments and Costs at Closing.
The Loan Amount, of course is the total you are borrowing. But the Interest Rate alone doesn’t represent all of your borrowing costs. The APR figure on Page 3 shows that.
Likewise, Monthly Principal & Interest aren’t the complete amount you will actually PAY each month.
The Projected Payments figures add other costs, such as Mortgage Insurance Estimated Escrow, Taxes, Insurances and Assessment to show the approximate amount you will pay each month, over time.
The Estimated Closing Costs are directly loan-related. while the Estimated Cash to Close adds other known closing costs to tell you the estimated cash you’ll need to have to close this loan.
If an eligible loan proceeds from Estimate to closing, creditors must provide a Closing Disclosure form documenting the actual transaction terms and costs THREE business days before consummation. It must be in writing, whether paper or digital, and disclose ONLY the information specified by the CFPB.
If terms or costs change prior to consummation the creditor must provide a corrected disclosure containing the updated terms. In some cases, this may require an additional 3-business-day waiting period to consummation.
Consummation and Closing are legally distinct although they may occur at the same time depending on applicable State laws. Consummation occurs when you become contractually obligated to the CREDITOR on the loan not, for example, the real estate seller. The Disclosure must be delivered three business days prior to the legal Consummation date.
Yes, if circumstances change, such as:
If any of these events change 3rd-party charges beyond the 10% tolerance limit creditors may issue a revised Loan Estimate.
If a creditor issues a Loan Estimate they are presumed to have collected all 6 pieces of required information. They may not claim a change in circumstances by receiving one of these pieces of information AFTER issuing a Loan Estimate.
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